Aviva share price’s downward trajectory extended on Monday, driven by concerns over its operating environment. Britain’s largest general insurer’s shares were at -0.5 percent at the time of writing, trading at GBX 490.8. The company announced on Friday that it will be repurchasing £ 500 million worth of surbodinated notes, yielding 6.125% due in 2036.
The downside for the insurer is brought by concerns over a decline in insurance premium costs, especially in the UK. High premiums in the UK were partly responsible for the forecast-beating earnings reported by Aviva (LON: AV) in the quarter ending June.
However, the Association of British Insurers (ABA) reports that the rates are coming down. For instance, the average quarterly cost of motor vehicle insurance cover declined by 2 percent from £635 to £622- the first time in two years.
Meanwhile, with interest rates set to decline further, it could result in reduced earnings from interest-bearing investments such as government bonds. The Federal Reserve, the Bank of England (BoE) and the Bank of Japan will make interest rate decisions this week, and that could have far-reaching impacts across financial markets. That said, the BoE is expected to hold lending rates steady at 5 percent, which will help safeguard the bottom line in Aviva’s UK market.
The RSI momentum indicator on Aviva’s share price calls for further downside if resistance stays below 490.00. Initial support will likely be at 488.90, but if the sellers extend their control, the resulting momentum could break below that support and test 487.70.
Alternatively, if the action goes above 490.00, it will favour the buyers to take control, with the first resistance likely to come at 491.00. However, if they extend their control, it could fuel further gains to break above that level. In that case, the downside narrative will be invalid, and further gains to test 492.10.
This post was last modified on Sep 16, 2024, 14:47 BST 14:47